Gold futures rise after Fed bond-buying move

Federal Reserve announces new bond-buying program; dollar falls

V.Phani Kumar

SAN FRANCISCO (MarketWatch) — Gold futures climbed Wednesday, but settled off the session’s highs, after the U.S. Federal Reserve announced a new bond-buying program, a move that’s expected to further weaken the dollar and boost dollar-denominated commodities.

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Gold for February delivery
US:GCG3
rose $8.30, or 0.5%, to settle at $1,717.90 an ounce on the Comex division of the New York Mercantile Exchange, after touching an intraday, post-Fed announcement high of $1,725.

It was trading around $1,712.40 before the Fed news. Gold futures fell $4.80 Tuesday, the first drop in four sessions.

The Federal Reserve announced a new bond-buying program Wednesday to keep the recovery going in the jobs market and, in a surprise, set thresholds on unemployment and inflation to guide the market about when it will eventually hike rates. See: Fed to buy more bonds, sets jobless threshold.

Reuters

U.S. Federal Reserve Chairman Ben Bernanke

The continuing Fed policy of quantitative easing “will further weaken the U.S. dollar and support gold well into 2013, with volatile trading patterns along with profit-taking periods as well,” said Jeffrey Wright, managing director at Global Hunter Securities.

Ahead of the Fed news, Wright said he didn’t expect a quick run up in gold prices, but rather a “steady progression with higher gold above $1,850” in the first half of 2013.

The U.S. dollar’s losses intensified following the central bank’s announcement, fueling more gains for gold prices. A depreciation in the dollar tends to pull investors toward gold as a store of wealth and makes the metal cheaper for holders of other currencies.

The ICE dollar index
DXY, +0.06%
a measure of the greenback’s performance against a basket of six major global currencies, fell to 79.791, compared with 80.061 in North America late on Tuesday.

Silver prices got a sizable boost as well, with March futures
US:SIH3
adding 77 cents, or 2.3%, to settle at $33.78 an ounce.

March copper futures
US:HGH3
tacked on 3 cents, or 0.8%, to settle at $3.72 a pound. Palladium for March delivery
US:PAH3
rose $4.35, or 0.6%, to $701.15 an ounce, while January platinum futures
US:PLF3
climbed $6.40, or 0.4%, to $1,646.40 an ounce.

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